Ihug embarks on expansion

By RICHARD WOOD

Internet provider ihug is emerging from the tech industry drought with a new chief executive and plans to expand its telecommunications business here and in Australia.

In New Zealand the internet pioneer is up against Telecom's metro stranglehold in the broadband internet access market, and little government interest in its satellite service for regional areas. But ihug is finding new business with telco services, wholesaling and internally developed web service offerings.

It claims 21 per cent revenue growth for the year ending March and now does 40 per cent of it's business in Australia.

Incoming chief executive Martin Wylie has the task of getting its 150,000-strong subscriber base to pick up on toll phone services. At present, New Zealand phone customers number 10,000 out of 90,000, while in Australia only 1000 of the company's 60,000 internet subscribers use it.

Wylie, who is not a shareholder in ihug, has a background in telecommunications and management. He was Telecom's company secretary and general counsel for nine years after its formation in 1987 and latterly was chief executive of Auckland law firm Simpson Grierson.

Ihug is about to begin a million dollar network upgrade of core servers and routers in Australia, an investment Wylie said was funded out of cash flow.

The company has just begun buying virtual switched phone services off Telecom subsidiary AAPT so it doesn't need it's own "points of presence" right across Australia.

Wylie said flat rate broadband access was not on the horizon and he couldn't identify any other such "punches" that ihug could bring to market now. Instead he cited add-on services such as "The Gooey" web portal and "T2V" text to voice, which provide incremental revenue.

Wood also confirmed a focus on driving up average revenue per user.

The Ispy anti-virus and anti-spam services are ihug's biggest add-on offering, with a claimed use rate of 20 per cent of customers. The service costs between $2.50 and $5 a month.

The Gooey, launched in June, has 3500 customers who are active daily, half of them ihug customers. It costs $2.95 a month and a $4.95 set-up fee.

The T2V service launched in August has 1700 customers, including 500 outside Australasia. T2V represents international expansion opportunities and director Tim Wood has been promoting it to US and UK media. It costs 20c to send messages to landlines, 50c to mobile.

Promised earlier in the year and now due later are IP telephony solutions for businesses which dispense with traditional PABXs and use internet technology right from the telephone to the phone network and to branch offices.

A key ihug plank will be buying and selling bandwidth and combining quantities of traffic for better pricing.

Ihug has positioned itself as a wholesaler of bandwidth to internet providers, especially in Australia.

It has 130 provider customers, mostly in Australia, who resell its Ultra high-speed one-way satellite services in regional areas where there is little competition.

Wood said there were 5000 Ultra customers in New Zealand, but would not provide numbers for Australia.